Reflecting on my Investment Banking Experience: Lessons Learned

As many 2nd year analysts begin to leave, I thought I'd reflect on my own experience in banking. Here are some takeaways: 

Job Related Takeaways:

  • The hours bankers actually work are a bit exaggerated and a lot of people conflate time spent in the office with time spent working. A lot of time is spent waiting for comments; you might be in the office from 10am to 12am (14 hours) but do nothing for half the day since your comments didn't come until 5pm.  

  • The difference in size between bulge bracket banks and boutiques is overemphasized during recruiting. What really matters to you as an analyst should not be the overall size of the bank, but the size of the group you are joining. That's what really will affect your experience. You can join a small group at a bulge bracket (<5 analysts in each class) and get a similar level of "intimacy" vs. a boutique.

  • When I was recruiting, I didn't quite appreciate the pay differential between bulge brackets and boutiques. It's not just the $10k difference in base salary. Over two years as an analyst, this could result in up to $100k+ in less cumulative income if you work at a bulge vs. a boutique. After-tax, that's roughly a year of business school tuition! I'm not saying that you should always choose a boutique because of higher pay, just that the difference was a lot more significant than I had expected. See below for Year 1 compensation for a typical analyst: Signing Bonus: Bulge ($10k) vs. Boutique ($15k - $25k), Salary: Bulge ($85k) vs. Boutique ($95k), Bonus: Bulge ($60k) vs. Boutique ($80k+).

  • Modeling is so overrated. Modeling is not some glorious process; it's just linking a bunch of excel cells together while also having the functionality you want for the analysis (i.e. sensitize certain drivers). What's more interesting is the thinking behind the numbers that go into modeling, which you don't really do too much in banking. 

  • A lot of the analyst job is just reconciling numbers: I can't tell you how much time I've spent checking multiples, checking to make sure the client's financials tie to each other across different files, etc. 

  • Many companies are surprisingly disorganized and a lot of their own financials will not tie or will be extremely poorly formatted / hard to understand. I'm always amazed by how the world seems to run properly with the vast majority of things so disorganized and people so clueless (including bankers).

Life and Career Related Takeaways:

  • Having had to cancel a lot of plans because of work, I realized that my time is my most valuable resource. We all have a limited amount of time and cannot get any more, no matter how rich or powerful you are. Going forward, I am placing a lot of importance on work life balance and when I think about compensation, I will think about it in terms of $ / hour, not the absolute $ amount.

  • Treasure all your friendships. Unless you are going to go to school again, it's pretty tough to forge the same kind of bonds. I am resigned to the fact that as we get older and work, our social circles will inevitably shrink. It's difficult to manage a demanding career, while also maintaining friendships, finding a significant other, and keeping close with family. And not to mention also having to take care of yourself and your own health.

  • I am not suited for a client services job. I thought a lot about how banking could be improved, and there are a ton of things that I think would make the job more sustainable for me (like some sort of regular WFH policy), but there are parts of the job that are impossible to remedy (like last minute fire drills). Having to always be at the whims of your client is just not something I enjoy or would excel at.

  • I tend to dwell on things and one thing I always try to remind myself of is that life is too damn short and I shouldn't take things so seriously. Who cares if you're not top bucket? Who cares if the EBITDA doesn't tie on the football field? Just fix it and do your best. A technique that usually works to help me remain calm during banking is to think about how inconsequential we all are in the grand scheme of the universe. Whether you become the next Henry Kravis or you are middle management for a small company, will it really matter in 100, 200, or 1000 years? Probably not.

Comments (32)

  • Analyst 1 in IB-M&A
Jun 13, 2020 - 11:51am

Thanks for this, some good stuff in here. Didn't need to send me spiraling into an existential crisis with that last sentence tho.

  • Intern in IB-M&A
Jun 13, 2020 - 12:04pm

Damn bro - this was kinda dark but thanks for being honest. Def the #1 thing I fear going into FT is the loss of some friendships I made in college.

  • Prospect in IB-M&A
Jun 13, 2020 - 12:15pm

Thank you for this insight :) What are your next steps now? You said client services isn't a good fit for you so where do you plan to move on to for the next part of your career?

  • Analyst 2 in IB-M&A
Jun 13, 2020 - 12:50pm

Haha I'm also a second year about to exit banking and feel the same way about a lot of these things. I used spend a ton of time obsessing over the details and wanting everything to be perfect, but then I took a step back and realized how insignificant it is in the overall picture and that I'd rather get more sleep lol. Honing my efficiency and choosing which battles are worth fighting were key for me.

Jun 13, 2020 - 1:21pm

Great post. Love the part about self-awareness and knowing you don't want your career at the top to hinge almost exclusively on (often times unreasonable) clients. I also quickly realized how much I hated the schmoozing end of client management and having to pretend like every company we worked with was game-changing and uniquely differentiated in its respective sector.

What's your next move and where do you see it taking you long-term?

Jun 14, 2020 - 5:52pm

Thanks. Like many others, I am headed into the buyside (PE). If I find the work more interesting and manageable, then my plan is to stay in the industry long-term. Of course, this is assuming I am actually good at investing and that the firm I am joining agrees. I guess my long-term plan depends on how the next 1-2 years go.

Jun 13, 2020 - 5:40pm

* Many companies are surprisingly disorganized and a lot of their own financials will not tie or will be extremely poorly formatted / hard to understand. I'm always amazed by how the world seems to run properly with the vast majority of things so disorganized and people so clueless (including bankers).

This is really underrated. So many things don't make sense or are so inefficient in this world that it's shocking how the world functions.

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  • Analyst 1 in S&T - Other
Jun 13, 2020 - 7:05pm

Awesome post, I remember first coming into the banking world from a blue collar family not just household..parents, uncles, cousins all wore safety helmets to work. I so anxious and worried that my intelligence, or abilities weren't up to standard or that Wall Street was gonna be some Mecca where I'd be changing the world and the pressure was on like all my peers in college made it sound like.

Come to realize at the end of the day it's just a means to an end - and if you give it your best, be grateful for the seat, and remember at the end of the day it's just a job and everyone's trying to get by, always helps put thing into perspective.

Jun 17, 2020 - 11:21am

I actually didn't have any specific goals going into IB--I just wanted to learn as much as possible (both about myself and about M&A, corporate finance, etc.). I basically wanted clarity, which I think I got.

I've approached my 2 years of IB mainly as a learning experience, and now coming out of my experience, I am much more clear on my strengths / weaknesses, what kinds of work I like and don't like, etc.

In terms of deal experience, I've been pretty fortunate in terms of my staffings and have seen a wide variety of types of transactions (public sellside, carveout, public buyside, hostile, etc.). I'm pretty happy with my growth and development from a deal experience / technical standpoint as well.

Jun 17, 2020 - 11:42am

I was in a M&A group at a BB. If you end up getting an offer at a bank that is structured with product and coverage groups (like MS, JP, Citi, BAML, CS, etc.), I'd highly recommend trying to join the execution / product groups. Although I can't speak to all the banks, generally speaking, these are some of the benefits I've seen with joining an M&A group:

  1. Generalist, which is nice if you want to explore industries. A big benefit to being generalist that I didn't appreciate was being able to easily spin a story to being interested in all kinds of industry-focused funds during PE recruiting. If you were interviewing for a L Catterton, you could say you were interested in consumer. If you were interviewing for Silver Lake you could say you were interested in tech.

  2. Generally work on higher % of live transactions vs. pitches.

A lot of people say that M&A groups do more modeling / technical work. That may be true, but I don't think it's a huge difference. Almost every group does some sort of modeling. I've been on projects where the coverage team holds the pen on the model as well. It's very project dependent.

On your 2nd question, my advice for PE recruiting is to prepare early (technicals + behaviorals). Recruiting for my year kicked off earlier than expected (as it always does) and I was lucky to have been relatively prepared when it kicked off. I know some others in my class were caught off guard and weren't able to pass through the technical / modeling screen. It's not like they weren't smart or capable, they just weren't prepared.

Another piece of advice I have is to figure out what you want early on. Do you want traditional buyout or growth equity? What firms would be your "dream" firms? What industries interest you? These are all difficult questions to answer, especially with such little experience on the job, but it's important to pick a goal or target to aim for and focus on it (even if this may change later on). Not only does having a clear focus impress headhunters, but it will also be tremendously helpful when on-cycle kicks off. It's entirely possible you will get last minute interviews at 2 different funds at the same time and you will have to make a quick judgment call as to which interview to go to. You may get an offer that explodes in 24 hours and you may need to decide quickly whether to sign it or not. Having some clarity on what you want will help you be prepared in making those decisions.

The PE recruiting process is so flawed and it totally sucks, but it is what it is.

  • Incoming Analyst in PE - Other
Jun 20, 2020 - 11:24am

Great points to think about when recruiting, so if you don't mind, I'd love to hear your thought process.

As someone in M&A where you presumably interacted with a range of sectors, how did you go about deciding what industries you wanted to target for buyside recruiting? Beyond reading the WSJ and seeing what news articles you were naturally drawn to (as seems to be the common advice on WSO), how did you go about intellectually deciding what industries to recruit for?

To that end, how did you also sus out what each firm's investing style was beyond the usual "opportunistic buyers / trusted operational partner" line that they feed LPs, and how that aligned with your personal investing philosophy? (Whether that's investing in deep value, high multiple GAARP-y businesses, or roll-up specialists...)

Thanks in advance for your two cents.

  • Trader in S&T - Equities
Jun 25, 2020 - 11:49am

Why exactly do you recommend joining execution/product groups? Do you mean joining them over an industry group or over M&A?

Jun 16, 2020 - 11:03pm

Building off of your last point in the first section:

Not only is it amazing that the world can operate with all that disorganization, but how so many of these deals can get done with an associate fudging inputs in a model to get a valuation that makes his MD happy, and looking for evidence to back-up these assumptions after the fact.

Pretty much every deal involving debt I feel like we're over-leveraging the company so much so there's a >25% chance they default on their interest payments within the first 2 years, which I'm sure will 100% happen now with COVID. The only reason that happens is because both my MD and the company wants a fat deal size for the press release

Jun 17, 2020 - 2:06pm

Bigger fee too. Also wanted to highlight how common it is for your client or your VP / MD to ask for an incredibly robust and complicated Excel build for an operating model that might take weeks to build and then they rush super hard through the actual assumptions with the management team so that you end up with a massive and impressive functional model with assumptions that are super rushed, unsupported and don't align with how management thinks of the business. It's banking in a nutshell.

Jun 18, 2020 - 6:29pm

Thanks. I definitely don't think being in any coverage group pigeon-holes you. It just makes your story easier to tell and more believable / strong if you are in an the same industry group as the industry you say you're interested in. I don't think it's a huge deal regardless.

  • Consultant in Consulting
Jun 18, 2020 - 9:17pm

Didn't realize the sizable discrepancy between BB and EB pay. I guess BBs figure the "prestige" of working for them allows them to pay what is essentially below market value?

Jun 19, 2020 - 3:11am

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